Technology Leasing Limited v Stephen and Robyn Eyre Pty Ltd t/as Hot Shots Express

[2011] NSWLC 17

Local Court

New South Wales

Medium Neutral Citation:	Technology Leasing Limited v Stephen and Robyn Eyre Pty Ltd t/as Hot Shots Express and Ors [2011] NSWLC 17
Hearing dates:	21 & 30/06/2011
Decision date:	08 July 2011
Jurisdiction:	Civil
Before:	Magistrate Atkinson
Decision:	Leave granted for the defendants/cross-claimants to amend their pleadings
Catchwords:	CIVIL PROCEEDINGS - Amendment of pleadings during hearing - Effect of failure to comply with order for discovery
Legislation Cited:	Civil Procedure Act 2005
Cases Cited:	Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 Halpin v Lumley General Insurance Ltd [2009] NSWCA 372 Richards v Cornford (No 3) [2010] NSWCA 134
Category:	Interlocutory applications
Parties:	Technology Leasing Limited - plaintiff/cross-defendant Stephen and Robyn Eyre Pty Ltd t/as Hot Shots Express - first defendant/cross-claimant Robyn Eyre - second defendant/cross-claimant Stephen Eyre - third defendant/cross-claimant
Representation:	Mr Carter for the plaintiff/cross-defendant Mr Crossland for the defendants/cross-claimants Horton Rhodes for the plaintiff/cross-defendant Attwood Marshall Lawyers for the defendants/cross-claimants
File Number(s):	2010/287724
Publication restriction:	Nil

JUDGMENT

1. The defendants have applied for leave to file and serve a further amended defence and an amended statement of cross-claim. The application was made after day four of the hearing of the proceedings. The hearing will continue on 22 and 23 August 2011.

1. The proceedings are being heard with four other cases (i.e. the "the 21st Century proceedings", "the Colan Bros proceedings", "the Jorja Investments proceedings" and "the Shade and Shelter proceedings"). All cases involve similar facts and the same rental agreement.

1. All witnesses have given their evidence and been excused in the Eyre proceedings, the Jorja Investments proceedings and the Shade and Shelter proceedings. The defendants are yet to call their witnesses in the Colan Bros proceedings and the 21st Century proceedings.

1. To minimise costs, I dispensed with the requirement for the defendants to file and serve a notice of motion in relation the amendment application. The defendant did not prepare an affidavit in support of its application.

1. The proceedings were re-listed for argument in relation to the amendment application and this judgment sets out my decision on the application.

Factual background

1. The plaintiff is suing the defendants for monies outstanding on a rental agreement. The first defendant entered into the agreement with the plaintiff and the other defendants provided written guarantees in relation to the agreement.

1. The defendants entered into a contract for the supply of telephony services with another company at the time they entered into the rental agreement.

1. The claims in each of the cases vary from $29,655.08 to $46,156.40. Once interest is added in, the total amount in dispute in all of the cases is almost $200,000.

1. The cases were at different stages of preparedness earlier this year.

1. At a directions hearing on 2 February 2011, the 21st Century proceedings were allocated a hearing date of 26 May 2011, a review date of 19 April 2011 and the standard practice note directions were made.

1. The four other cases were before the court for directions on 22 February 2011. On that occasion, I made various orders by consent including:

• Giving leave for the plaintiff to file and serve a reply to the amended defence and a defence to the cross-claim
• Allocating a hearing date of 6 - 8 June 2011 and a review date of 19 April 2011
• Ordering discovery, which was to be completed by 15 March 2011
• Orders for the service of evidence.

1. The plaintiff provided informal discovery by email on 30 March 2010. All of the documents provided by way of informal discovery were also provided on CD to the defendants' solicitors together with an affidavit verifying discovery. I will comment further on the issue of discovery later in my decision.

1. The question of whether the defendants complied with the order for discovery was not in issue. However I note that when I reviewed the files whilst preparing this decision, I observed that a copy of the defendants' list of documents had been placed on the file in three of the five cases (i.e. the Shade and Shelter proceedings, the Eyre proceedings and the Colan Bros proceedings). The lists of documents were dated 13 March 2011 and contained an affidavit verifying discovery and a solicitor's certificate of advice.

1. When all cases came before me for review on 19 April 2011, I made various orders by consent including:

• Vacating the hearing date in the 21 st Century proceedings and setting it down for hearing with the four other cases from 6 to 8 June 2011
• Ordering discovery in the 21 st Century proceedings, which was to be completed by 6 May 2011
• Confirming the hearing date in the four other cases.

1. The next event of importance to this application was the service by the plaintiff of an affidavit in each of the proceedings a couple of days before the hearing was due to commence. The affidavit was dated 31 May 2011 and made by Mr Harrison, Team Manager Recoveries for the plaintiff. The affidavit annexed material that Mr Harrison had found while preparing for the hearing that he believed was of relevance to the issues in the proceedings and that had not been annexed to his earlier affidavit dated 5 April 2011. Importantly, some of the documents that he annexed to his affidavit fell within the categories of documents covered by the order for discovery.

Defendants' arguments

1. In support of their application, the defendants indicated that their proposed amendments fell into the following categories:

(1)   Those relating to a secret commission;

(2)   Those relevant to 'recommended retail price';

(3)   Those relevant to the 'rate of return';

(4)   More broadly, the addition of particulars to the 'Contracts Review' defences;

(5)   Pleadings that flow from the (already pleaded) allegation that the plaintiff did not supervise Network Techs;

(6)   An amendment to paragraph 14 of the defences - a deletion of three words and the addition of another.

1. The defendants argued that they should be allowed to amend as:

• In the circumstances, the plaintiff would not suffer any prejudice
• If there were prejudice (which is rejected), it could be cured by allowing the plaintiff to put on evidence before the 22 August 2011 trial date
• There is an excuse for the amendment application coming when it does
• The excuse is referable to the plaintiff's conduct, namely the service of John Harrison's affidavit dated 31 May 2011 a couple of days before the hearing.
• The proposed pleadings merely reflect the way the matters have been litigated at trial
• The plaintiff acquiesced to the course at trial that elicited the evidence relevant to the pleadings

1. The defendants' counsel conceded during the hearing of the amendment application that they had received the documents relating to the 'rate of return' prior to the service of Mr Harrison's affidavit.

Plaintiff's arguments

1. The plaintiff strenuously opposed the amendment application on the following basis:

• Categories (a) to (e) seek to introduce a new basis and foundation for the claim that the contracts are unconscionable and should be set aside pursuant to section 51AB of the Trade Practices Act or the personal guarantees pursuant to the Contract Review Act.
• Category (f) dramatically alters the way in which the Defendants seek to link the rental of the equipment from TLL to the telephony services of Network Techs and the plaintiff would suffer significant prejudice if the amendments were allowed. It would have run the case differently if this matter had been pleaded earlier (eg. It would have led different evidence, cross-examined witnesses differently and may have called additional witnesses.)
• The defendants have not explained the reason for the late amendment and have not provided any affidavit is support of their application. Importantly, they have not provided any evidence as to the steps their solicitors took to review the discovered documents and the evidence and why they did not utilise interlocutory steps such as notices of motion or notices to produce prior to the hearing commencing.
• Using the Eyre proceedings as an example, the defendants had previously been provided with copies of the documents that were attached to Mr Harrison's affidavit of 31 May 2011.
• If the amendments were allowed then the plaintiff might need to amend its pleadings, serve additional evidence and possibly call expert evidence. Witnesses would have to be recalled and it is likely that the two days that have been allocated for the remainder of the hearing would be insufficient. This would be inconsistent with the "just, quick and cheap" resolution of the proceedings.
• The 21 st Century proceedings are likely to have been resolved if they had proceeded to hearing in May. The plaintiff would not have consented to the vacation of the hearing date if it had realised that the proceedings might not be resolved for some months.

The law

1. Rules 21.1 to 21.7 of the Uniform Civil Procedure Rules deal with discovery of documents. UCPR 21.3 requires the party who is giving discovery to provide a list of documents, the details of which are prescribed by the rule. UCPR 21.4 requires the list of documents to be accompanied by a supporting affidavit and a solicitor's certificate of advice. The rule prescribes the matters that must be included in both documents.

1. Division 1 of Part 6 of the Civil Procedure Act 2005 contains sections dealing with the guiding principles of case management. Section 64 deals with the amendment of documents generally.

1. Case management has been the focus of much attention in recent years.

1. NSW gave statutory underpinning to case management principles when it enacted Part 6 of the Civil Procedure Act . Since that time, there have been a number of significant decisions by the High Court and the Court of Appeal that guide courts when dealing with applications such as those that are currently before me. These include Aon v Risk Services Australia Limited v Australian National University [2009] HCA 27, Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230, Halpin v Lumley General Insurance Ltd [2009] NSWCA 372 and Richards v Cornford (No 3) [2010] NSWCA 134.

1. The plaintiff's counsel provided me with useful extracts from these cases but for brevity's sake I have not reproduced these in this judgment.

Discussion

1. As a preliminary matter, counsel agreed with my suggestion that I would treat all proceedings in the same way, even though the evidence was complete in some proceedings and not in others. The basis for my suggestion was that it would be unfair to distinguish between proceedings given that they had all be set down for hearing at the same time.

1. I do not accept the defendants' submission that the plaintiff would not be prejudiced by the amendments or that any prejudice could be cured by allowing the plaintiff to put on more evidence prior to the next hearing date.

1. There is no doubt that if I were to allow the defendants' application then it would have a dramatic effect on the conduct of this litigation. The plaintiff will need to reconsider its position in relation to its pleadings and will need to adduce further evidence to address the new issues in the proceedings. Witnesses will need to be recalled and it is likely that extra hearing days will be required. The additional costs and delays will be significant. It will also have an impact on availability of judicial and administrative resources for other proceedings.

1. This clearly is the type of prejudice that the High Court and the Court of Appeal have indicated has to be avoided. It is inconsistent with the concept of a "just, quick and cheap resolution of the real issues in dispute".

1. The defendants also failed to tender affidavits explaining and justifying their actions to date. This approach is not to be recommended, particularly when a party is seeking an indulgence in circumstances such as these.

1. Had there not been problems with discovery, I would have refused the defendants' application relying on:

• Part 6 of the Civil Procedure Act
• The cases referred to earlier in my decision
• The defendants' failure to make this application earlier in the proceedings
• The clear prejudice to the plaintiff
• The flow on effect on the availability of judicial and administrative resources for other proceedings.

1. I turn now to the issue of discovery

1. Discovery is not utilised very often in the Local Court, as the cost of discovery can be disproportionate to the importance and complexity of the real issues in dispute.

1. In this case, the Court ordered discovery at the request of the parties so the legal representatives must have been aware what that would mean for their clients and themselves, namely, a significant amount of work would be required to identify and produce documents in accordance with the order and the rules.

1. During the hearing of the amendment application, the plaintiff tendered:

• A copy of its affidavit verifying discovery
• A copy of the email sent by its solicitors on 30 March 2011 enclosing the informally discovered documents
• A copy of extracts from the computer file directory showing a sample of the documents contained in the CD provided with the affidavit verifying discovery.

1. Whilst the plaintiff provided the defendants with an affidavit verifying discovery and a number of documents, it has not done so in accordance with UCPR 21.3 and 21.4.

1. The plaintiff failed to provide a list of documents and it appears that it has also failed to provide the solicitor's certificate of advice. The lack of a solicitor's certificate of advice was not raised during the hearing of the amendment application. This is an important issue so I intend giving parties the opportunity to address me on this issue before I make any orders, as it may be that the copy of the affidavit verifying discovery that was provided to me had been copied incorrectly.

1. Although Mr Harrison's affidavit of 31 May 2011 contained only a few documents, and these documents appeared to be the same as the documents that were provided on the CD, there were subtle differences between some of the documents. For example, the application for finance annexed to the affidavit of 31 May 2011 contained more information that the version of the document on the CD. In the absence of further evidence, it is impossible for me to assess the significance of these differences.

1. It is arguable that if the discovery process had been more thorough then the documents would have been identified earlier. If it transpires that a solicitor's certificate of advice was never prepared, then I would have even greater concerns about the thoroughness of the discovery process.

1. It may be that the plaintiff has actually served all of the documents that fall within the scope of the order for discovery. Even if this is the case, by failing to provide a list of documents, the defendants have been deprived of the opportunity to see whether there are any documents to which a claim for privilege attaches and whether the claim should be challenged.

1. The defendants certainly had the opportunity to seek interlocutory relief earlier in the proceedings. They could have filed a notice of motion seeking an order to require the plaintiff to properly comply with the order for discovery.

1. Given the proximity of service of Mr Harrison's affidavit and the hearing date, it is not surprising that the defendants did not apply to amend their pleadings prior to the hearing. I do not yet have the transcript of the hearing but if my memory serves me correct, the issue of amendment of the pleadings was raised early on in the hearing. The issue was deferred in the interest of ensuring that court time was used effectively during the hearing.

1. When deciding whether to allow an amendment, s 64 of the Civil Procedure Act requires me to have regard to s 58 of the Act.

1. Section 58 of the Civil Procedure Act requires the court to seek to act in accordance with the dictates of justice when making orders for the management of proceedings including for the amendment of a document. When determining what are the interests of justice, a court must have regard to ss 56 and 57 of the Act and may have regard to a range of matters listed in subsection (2)(b). For brevity's sake, I will not list all of the matter however some are clearly relevant in these applications. For example, these are clearly complex proceedings and in my view, given the real problems with discovery, there is the potential for the defendants to suffer a real injustice if they are not allowed to amend their pleadings.

1. Even though the defendants should have taken steps earlier to seek an order to compel the plaintiffs to comply with the order for discovery, I do not consider that this failure entitles the plaintiff to avoid facing the consequences of its earlier actions.

1. Despite the defendants' concession that they had previously been provided with the documents that underpin the proposed amendments falling into category (c), I am of the view that the problems caused by the incomplete discovery are such that the defendants should not be precluded from making these particular amendments.

1. Even though the effect of allowing the defendants to amend their pleadings will increase the costs for the plaintiffs and might lead to some delay in the proceedings, I am of the view that Part 6 of the Civil Procedure Act and the decisions of the High Court and Court of Appeal do not require me to refuse an amendment if do so would cause an injustice. I note that I would have formed this view even if it becomes apparent that the plaintiff's solicitor did prepare the certificate of advice required for discovery.

1. For the above reasons, I give leave for the defendants/cross-claimants to amend their pleadings. I will hear from the parties before I make further orders for the conduct of the proceedings.

Magistrate J Atkinson

8 July 2011

Decision last updated: 15 July 2011